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Splurging big? Beware, the taxman is watching

india Updated: Feb 21, 2013 12:00 IST
Gaurav Choudhury

If you have recently decked up your bathroom with fancy fittings or picked up a swanky plasma-screen television set, then taxmen could be profiling you, part of a new directive to scoop “information on everything about a taxpayer”.

The government will launch a compulsory “360 degree profiling” of income tax assesses, for which income tax officials will closely watch your lifestyle. Recently, a customer who bought a dapper overcoat worth Rs 11,000 was randomly asked by the cashier at a city mall to reveal his PAN (permanent account number).

Your splurging habits — expensive watches, stylish wardrobe additions, family holidays and even sunglasses — could lead the taxmen to your doorstep, especially if tax payments and returns are not in order.

Tax payer profiling refers to information on everything about a tax payer including previous returns, expenditure summary and also information about family income.

Armed with a survey on “ostentatious display” of wealth, the government is collecting the information from sellers, such as shops and dealers, of expensive consumer items bought by individual customers. Annual information returns (AIR) are being particularly watched.

Introduced in 2004, AIR mandates banks and financial institutions to furnish information to the government about high-value accounts.

“A 360 degree profile of all taxpaying individuals and institutions would be created to help decrease tax evasion and tax fraud,” a source said.

The government has been working in this direction for some time and has used technology to improve tax collections. The Bangalore tax cell processes 20 million income tax returns a year.

These are then analysed using an integrated taxpayer data management system (ITDMS) to check tax evasion.

P Chidambaram, in his earlier stint as the finance minister in 2007, had approved an integrated 360 degree mapping of individual tax payers by utilising data collected from various sources like AIRs from banks, credit cards, mutual funds, stock market and property registrars.

The data is then analysed to help identify clandestine transactions.

"The government has also conducted surveys and enquiries on architects, imported watch dealers, luxury sanitaryware vendors, imported car dealers and vendors of consumer goods, such as plasma TVs and refrigerators."

Sources said such clues would be particularly useful to elicit information on cash transactions.

"One of the major constraints was the absence of information about spending where cash was the dominant mode of payment," the source said.